QUESTION 1 (25 marks)

John is the owner of a local gardening service company called Green Gardens (Pty) Ltd (“Green Gardens”). Green Gardens has a 30 June financial year-end.

You have been presented with the pre-adjustment trial balance of Green Gardens (Pty) Ltd as at 30 June 2024:

? = To be calculated.

During the year ended 30 June 2024, the following transactions took place that have not yet been accounted for:

Note 1: New lawnmowers:
1 February 2024: Green Gardens placed an order for 3 new lawnmowers from Breez Ltd, a foreign supplier situated in Germany. The price of the new lawnmowers was R5 000 each.

15 February 2024: The lawnmowers were shipped free on board (FOB) shipping point and Green Gardens paid the outstanding balance to Breez Ltd on the same day.

1 March 2024: The shipment arrived at the Durban harbour.

1 March 2024: An additional R500 was paid in cash for the delivery of the new lawnmowers to Green Gardens’ premises.

1 March 2024: The lawnmowers came in 2 parts, namely the engine and the body. Green Gardens needed to hire a technician to assemble the parts of the lawnmowers. The technician charged Green Gardens total of R600 for all three of the lawnmowers’ assembly. With this technician, Green Gardens has an arrangement to pay all invoices at the end of each month. On 1 March 2024, the new lawnmowers were ready for use.

Note 2: Old lawnmower:
On 1 May 2023, Green Gardens sold their old lawnmower at a loss of R600. This original lawnmower was purchased on 1 July 2019 when the business was started.

Note 3: Vehicles:
Green Gardens owns one vehicle that they bought when they started the business on 1 July 2019.

31 July 2023: Green Gardens serviced the vehicle at a cost of R2 000.

30 June 2024: Green Gardens sold the vehicle for R250 000. On this day, the company also bought a new vehicle for R500 000. The new vehicle has a useful life of 7 years with a residual value of R150 000.

Note 4: Land:
On 31 October 2023, Green Gardens purchased a piece of land for R800 000, with the intention of building an office.

Additional information:

• All lawnmowers, old and new, have a useful life of 5 years, with no residual value and are depreciated on the straight-line method.
• Green Gardens pays cash for all transactions unless otherwise stated.

REQUIRED:
With reference to Note 1: New lawnmowers, calculate the cost price of the new lawnmowers. (3 marks)

With reference to Note 3: Vehicles, calculate the profit or loss on the sale of the vehicle for the year ended 30 June 2024.
• Show all workings and reference accordingly.
• Round off to the nearest Rand.
(6 marks)
Prepare the general ledger account for Accumulated depreciation – Lawnmowers
for the financial year ended 30 June 2024 of Green Gardens (Pty) Ltd.
• Close off the account at the financial year-end.
• Ignore dates.
• Show all workings, and reference accordingly.
• Ignore VAT.
• Round off to the nearest Rand.
(10 marks)

Prepare an extract of the Statement of Financial Position of Green Gardens (Pty) Ltd as at 30 June 2024, showing only the non-current assets.
• Totals are not required.
• Notes to the financial statement are not required.

QUESTION 2 (20 marks)
C Bridal (Pty) Ltd (“C Bridal”) is a company that makes unique wedding dresses. C Bridal has a 31 December financial year-end. C Bridal makes use of a perpetual inventory system.

C Bridal and Sew Elegance have the following arrangement:
• C Bridal makes use of a perpetual inventory system.
• C Bridal makes credit purchases of lace material from Sew Elegance
• C Bridal pays for credit purchases of a particular month on the first Friday of the following month. Example, credit purchases for the month of October 2024 will be paid on 3 November 2024.
• Sew Elegances will give a 10% settlement discount on the outstanding amount if C Bridal pay within 15 days of purchase.

During the month of November 2024, the following transactions took place that have not been recorded yet:
1. On the 1st of November 2024, C Bridal still owed Sew Elegance R7 500. They paid the outstanding amount on the 2nd of November 2024.
2. On the 5th of November 2024, C Bridal purchased a large order of material of R12 000 from Sew Elegance.
3. On the 10th of November 2024, C Bridal paid Sew Elegance for the material pur- chased on the 5th of November 2024.
4. On the 20th of November 2024, C Bridal made another purchase of R6 500. C Bridal received a 5% trade discount on the purchase.
5. Some of the material purchased on the 20th of November 2024 was damaged and C Bridal returned material worth R750 on the 25th of November 2024.

On 1 December 2024 Sew Elegance sent C Bridal a debtor’s statement as of 30 November 2024. The balance on this statement was R8 325. When C Bridal compared the statement with the Sew Elegance general ledger account in their accounting records at the same date, the following discrepancies were found:
1. The return of products on the 25th of November was not reflected on the state- ment.

2. An invoice to the value of R1 500, to C Brooks, has been incorrectly reflected on the statement.
3. The trade discount received on the purchase made on the 20th of November 2024 was omitted from the statement.

REQUIRED:
Prepare the Sew Elegance (Pty) Ltd trade payables general ledger account for the month of November 2024 in the accounting records of C Bridal (Pty) Ltd.
• No dates are required.
• Close off the account at the month-end.
(10 marks)
Describe what a remittance advice is and why it is important to send one to a supplier.
(3 marks)

Prepare a remittance advice that C Bridal (Pty) Ltd will send to Sew Elegance (Pty) Ltd with the payment made on the 15th of December 2024.

QUESTION 3 (30 marks)
Bees Books (Pty) Ltd (“Bees Books”) is a bookstore in Cape Town with a 30 November financial year-end. Bees Books make use of the perpetual inventory system.
Bees Books is a registered VAT vendor.

The following transactions have not yet been recorded for the financial year ended 30 November 2024:
1. Bees Books sold 100 books on credit in October 2024 with an invoiced amount of R36 000 (including VAT). The cost price of these books sold was R15 000 (excluding VAT).
2. 15 of the books sold in October had water damage and the customers returned these books within one week of purchase.
3. At the end of October 2024, Bees Books received R28 000 cash from outstanding debtors.
4. In November 2024, Bees Books sold 250 books on credit with a total selling price of R62 500 (excluding VAT) and a cost price of R150 (excluding VAT) per book. Bees Books wanted to encourage debtors to pay the amount owing and offered a settlement discount of 10% if they pay within 10 days of purchase. Bees Books believes that all customers who bought books in November 2024 will make use of the discount.
5. Within 10 days of purchase all the customers who bought the 250 books during November 2024 made use of the settlement discount.
6. On 20th of November 2024 Bees Books received an email from a lawyer stating that E Brooks, a debtor with an outstanding balance of R3 000, is insolvent and that a settlement of 20 cents in the Rand would be paid on the 15th of November 2024. The remaining balance should be written off as irrecoverable.

7. Management of Bees Books estimated that 5% of the outstanding trade receiv- able balance on 30 November 2024 would be irrecoverable. There was no allow- ance for doubtful debt for the year ending 30 November 2023.

REQUIRED:

Prepare the general journal entries for all the transactions that occurred during the 2024 financial year in the accounting records of Bees Books (Pty) Ltd.
• Journal dates and narrations are not required.
• Show all calculations and references accordingly.
• Round off to the nearest Rand where applicable.
(30 marks)

QUESTION 4 (25 marks)
Walker (Pty) Ltd (“Walker”) is a company that manufactures kitchen cupboards. Walker has a 30 June financial year-end.

The following transactions took place during the current financial year and have not yet been recorded:

Note 1: Land:
On 1 January 2024, Walker received the valuation report from the bank, stating that the land is worth R9 250 000. The land was purchased on 1 January 2022.

Note 2: Machinery:
Machinery consists of 1 machine that is used to cut the material in the shape that is required. This machine consists of 2 components, namely mechanical and control. The mechanical component contributes to 75% of the total cost of the machinery and the balance of 25% of the total cost is attributable to the control component. The mechanical component has a useful life of 10 years, and the control component only has a useful life of 5 years and are depreciated on the straight-line method. The machine was purchased and ready for use on the 1st of January 2022.

On the 1st of May 2024 the control component of the machine broke and needed to be replaced. The component was relaced immediately at a cost of R550 000. The component was ready for use on the 1st of May 2024. Walker paid the supplier at the end of the month as agreed. The new control component has a useful life of 6 years and is depreciated on the straight-line method.

Note 3: Equipment:
Equipment consists of 20 drills. All the drills have been purchased on the 1st of January 2022. All drills were available for use on the 1st of January 2022. These drills have a useful life of 5 years and are depreciated on the straight-line method. On the 31st of November 2023, Walker had to service all the drills at a cost of R32 000. They paid the service provider immediately in cash.

Additional information:
• Walker is not a registered VAT vendor.
• Land is accounted for on the revaluation model.
• Exclude all income and deferred taxation implications.

REQUIRED:

By referring to notes 1 and 3, prepare the general journal entries to account for transactions related to land and equipment in the accounting records of Walker (Pty) Ltd for the year ended 30 June 2024.
• Journal dates and narrations are not required.
(7 marks)

By referring to note 2, calculate the depreciation expense for the machinery for the year ended 30 June 2024.
(8 marks)

Prepare an extract of the Statement of Financial Position of Walker (Pty) Ltd showing only the Non-current Assets of Walker Ltd for the year ended 30 June 2024.
• Totals are not required.
• Round off to the nearest Rand where applicable.
• Reference all workings (including those from 4.1/4.2)

Answers to Above Questions

Answer 1: The cost price of the new lawnmowers is calculated as follows:

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